To advance analytics and automation, The Hershey Co. announced Deepak Bhatia as its first chief technology officer and newest member of its executive committee.
Effective Oct. 23, Bhatia will lead the business giant’s global technology strategy, “architecting and deploying digital capabilities that are innovative, flexible and prepared to meet the changing needs of Hershey’s consumers, retail partners and employees,” a release said.
He brings in-depth expertise in developing cutting-edge automated systems, supply chain planning, optimization and simulation, artificial intelligence and predictive analytics, as he was formerly vice president of supply chain optimization technologies at Amazon.
During his 12 years at Amazon in supply chain optimization, Bhatia led the development of large-scale automated decision-making systems dealing with some of the most challenging problems in large complex supply chains, “bringing applied science, software engineering and product management together,” the release noted.
Before to Amazon, he spent 11 years at Applied Materials, where he also built expertise in predictive business analytics to inform product management and innovation strategies.
“We are investing in our people and digital capabilities to strengthen our infrastructure and scale across our growing supply chain and business units,” said Michele Buck, The Hershey Co. president and CEO. “As we continue to double down in this area, Deepak has the expertise needed to successfully lead our technology strategy leveraging end-to-end data, analytics and automation to elevate our employee experience, create commercial value and advance our leading snacking powerhouse vision.”
“I am honored and humbled to be joining Hershey, a company with an incredible legacy and culture,” added Bhatia. “We are experiencing unprecedented technological innovation, and I am thrilled to spearhead the development and execution of a technology-driven transformation that will meet and exceed the evolving needs of our consumers and customers. I look forward to shaping a future of innovation and excellence.”
Businesses are facing unprecedented and extraordinary change from disruptions due to innovation, new technologies and evolving customer expectations in today’s world. Supply chains are being broken apart and customized to reduce costs and meet evolving customer needs. Logistics structures must shift to more specialized solutions tailored to different customer segments, modes of transportation, and distribution networks.
The modern supply chain is a complicated network of organizations, systems and resources that needs data-driven and logical arrangements to bring products to the consumer. A stable and efficient supply chain is essential for a thriving world, but events during and after COVID-19 have revealed its vulnerabilities.
The supply chain was stressed by long queues created by a sudden surge in demand and material movement in 2021. Businesses started resolving this by stockpiling and inflation dampened demand, which made consumers more sensitive to and concerned about costs. Revenues may be positive in some quarters and negative in others in 2023. However, people will remain cautious of rising prices regardless of how they fluctuate.
Close monitoring of supply chain trends will require organizations to analyze, predict and resolve issues before they arise. Here are a few of those trends that bear watching.
Companieshave moved from the “just-in-time” to the “just-in-case” inventory management model and this has caused inventory levels to catapult, locking up significant working capital. Sensitivity to costs in 2023 will lead to inventory optimization to reduce expenses associated with backorders, overstocking, stockouts and wastages while delivering products efficiently.
Businesses have expanded their vendor base to diversify risk. Vendor consolidation will occur to facilitate higher purchasing power, better prices, lower freight and fewer transactional costs.
Current and historical spending reviews will be used to uncover inefficiencies and improve visibility of entire expenditures. Companies will enforce contract compliance and streamline the entire system.
Logistics is critical to achieving a reduction of any expense incurred in warehousing, transportation, labor and equipment by increasing efficiency and timely delivery through real-time information and full operational transparency.
Overall, supply chain prospects appear to be positive in 2023, although still not as strong as prior to the pandemic. Congestion in the shipping industry is becoming more manageable now, and recovery seems to be moving at a faster pace. There is hope there will be a return to normalcy sometime in 2023. The world of supply chains will be recovering, but it will require businesses to adapt to the changing scenario, and strengthen their supply chains.
Continuous evolution seems to be the model today. Supply chain executives must know and accept that the practices of the 20th century will not work when facing technology and digital disruptors, changes in the workforce or the transformation of operating models.
So, what will it take to be an efficient and stable 21st century supply chain amidst all the changes?
Future-ready supply chains are customer-centric, can operate in the ever-changing digital world with agility and do so profitably in order to be a revenue driver for the business. The future success for supply chain depends upon being strategic and anticipatory.
The terms logistics and supply chain management are sometimes used interchangeably. There are some opinions about the difference between the two terms that state supply chain management is the “new” logistics.
Logistics is the process of planning and executing the efficient transportation and storage of goods from the point of origin to the point of consumption. The goal of logistics is to meet customer requirements in a timely, cost-effective manner.
What is the future view of supply chain and logistics?
First and foremost – Business as usual is not an option!
Most supply chain managers expect problems to continue at least through 2024. More than half of logistics managers surveyed by CNBC do not expect the supply chain to return to normal until 2024 or after. The dismal outlook comes after almost three years of global supply chain disruptions and accompanying problems.
The biggest limitation for supply chains is no longer technologies and what they can do, but rather the imagination of the people who leverage the power and potential of them. Enterprises around the world are facing a perfect storm of change and therefore, it is crucial for supply chain leaders to transform business models, organizational structures and operations to thrive today and in the future.
The trucking industry is facing potential regulations to limit overtime for truck drivers in legislation to be introduced in April 2024. If passed, these regulations could greatly reduce the ability to transport goods.
Many supply chains may shift from global flows of goods and services to national, regional, and local networks of buyers and suppliers by 2025.
The vision for the supply chain in 2030 is a seamless end-to-end supply chain, with visibility into planning and execution at all levels. This vision will require product innovation and customer centric requirements related to the logistical activities prior to production from companies that use a long tail business strategy, all the way through to customer fulfillment.
The longer-term vision by 2040 includes logistics companies absorbing many manufacturers of basic goods and end-of-life value chain links relating to reuse, recycling and regeneration. This will make their impact on the consumer goods market essential, while simultaneously offering the most desirable and sustainable circular model with reliability and resilience.
Supply chains around the world will continue to be caught between politics, economics and ecology in the future. A burning question is: Will there be more regionalization and/or nearshoring in the future?
“If we want better global supply chains, there are lots of other things that have to be made better first. We need to be better with equitably including small businesses into global logistics. We need to be better with upcycling, and feedback loops. We need to be better with implementing Blockchain technology. We need to be better with material ecology and designing products for longevity. And so much more.” ―Hendrith Vanlon Smith Jr, CEO of Mayflower-Plymouth
Glenn Ebersole is a registered professional engineer and the Director of Business Development at JL Architects, a nationally licensed commercial architecture firm based in West Chester. He can be contacted by [email protected] or 717-575-8572.
Automation and advanced manufacturing in general are certainly increasing and are a current topic of discussion. On the workforce side, companies seem to be focusing on worker retention more than attraction. Both are important, but the focus seems higher on retention now. Supply chain has certainly become more of a common topic and focus given all of the issues during the pandemic.
Is the workforce shortage still an issue for manufacturers in the region?
Yes, it’s still an issue, but many manufacturers are slowing their hiring pace, so it’s not as big an issue as it was 6 to 12 months ago.
How does automation help keep the flow of goods timely?
It varies, but in general automation helps on many levels, including on time shipments. Automation provides a consistent/dependable level of quality and productivity output, which makes on time shipments more predictable. Automation works to minimize human factors that can affect consistent on time shipments.
Is the supply chain easing up or are manufacturers still seeing a wait time for parts?
There are still isolated pockets of problems, but in general, supply chain issues and delays have gotten much better. Logistics/transportation issues have dramatically improved from where they were 12 months ago.
Looking forward to the second half of the year, what are your thoughts on how the economy is impacting our manufacturers?
This varies but in general most manufacturers are “waiting” to some degree on the economy. Interest rate increases have made borrowing or paying back variable rate debt much more challenging. The constant drone about a recession has made manufacturers hesitant to invest as quickly as they might want to with many projects getting delayed. Higher costs have made projects and expansions more costly, so many are relooking/rethinking those activities or getting fresh bids before proceeding. The number of deals or sales of businesses (M&A activity)
has slowed. All that said, manufacturing across the Lehigh Valley is still doing well, we really haven’t seen or felt a recession yet!
Are we seeing more exports of local goods?
Really have no data or information to comment on this question. My gut tells me that exports are likely flat or down, but again, no real data to back it up.
A supply chain and logistics company will serve small to medium-sized businesses at no cost.
New Freedom, York County-based BrillDog started by Sam Polakoff, uses a cloud-based platform to provide supply chain technology to companies who need help moving their goods, said Frank DeSantis, BrillDog COO.
The New Freedom, York County-based firm launched in early May to provide transportation management systems (TMS) to companies looking to ship parcels, less than truckload (LTL) or truckloads of freight, DeSantis said.
The TMS is part of the SaaS-based supply chain suite that was the brainchild of Polakoff, who DeSantis said saw a need from companies who can’t afford to pay multiple vendors to create bills of lading, find shippers, track shipments and file claims for loss or damage.
“This has been an 18-month roadmap to get up and running,” DeSantis said. “We have launched the cloud-based platform to provide a service that didn’t exist before.”
DeSantis said all companies face the same challenges when moving physical goods, and “we are the champion for the little guy.”
To that end, BrillDog offers a free service that provides rate quotes, bills of lading, electronic carrier dispatch, LTL shipping, tracking, basic reports and dashboard and filing claims, DeSantis said.
“The BrillDog TMS will be available in three flavors, with the initial free version that we call FreeDog available today,” Polakoff, CEO, BrillDog, said. “The BrillDog TMS is a cloud-based platform that automates and optimizes inbound and outbound freight across initially LTL modes nationwide, with additional modes and features soon.”
Companies that need additional services like a carrier portal, parcel management and inventory optimization will be provided those services for a fee, DeSantis said.
“Knowing the long-term value and return on investment (ROI) of a TMS helps shippers make more informed decisions on whether a TMS solution aligns well with their budget and requirements,” Polakoff said. “For example, SMBs need a TMS to optimize transportation processes, control costs, and improve customer service levels but cannot afford a full-blown, enterprise-level TMS. We introduced our freemium model, FreeDog, to help level the playing field for small to medium-sized shippers.”
Knowing the Total Cost of Ownership (TCO) of a Transportation Management System (TMS) allows shippers to compare costs better and evaluate vendors. Polakoff said. By performing analysis and evaluating the TCO, businesses can assess the long-term value and return on investment (ROI) of each option and make an informed decision regarding which TMS solution best aligns with their budget and requirements.
As the company grows, DeSantis said they are looking to create a product marketplace where they can source goods with other vendors.
“That way, if a company loses a vendor, we can provide a new one,” he said. “Larger companies have tiers of suppliers, but small companies don’t and if they lose their vendor, they can’t function. That creates liability.”
Nexterus, which DeSantis said is one of the oldest area third party logistics providers, uses the BrillDog platform Polakoff created. He started the new venture to help companies he saw were struggling.
The company has launched a capital campaign to raise $3 million to expand its services to provide its platform to more growing businesses, DeSantis said.
“We licensed the technology early on because we wanted to offer our clients the best cloud based TMS on the market,” Polakoff said. “Our clients enjoy increased efficiencies in transportation operations, lower transport costs, and increased customer satisfaction.”
DAS Companies, Inc. is expanding into Bluegrass territory.
The Palmyra-based, full-service marketing and supply chain portfolio company announced Monday that it secured a new 200,000-square foot distribution center in Franklin, Kentucky.
Secured in July 2022, the facility is planned to officially open on March 1, 2023.
The warehouse location was selected to service DAS’ customer base in convenience stores, travel centers, and electronics and specialty retailers. The addition of this facility expands the company’s logistical network to three states and more than 800,000 square feet of warehouse solutions.
The Kentucky location will serve over 1,500 customers and has been recognized by the city of Franklin as an Economic Development Project.
The privately-held DAS Companies, Inc. designs, imports, and distributes truck & auto supplies, travel gear, and mobile electronics to consumers through partnerships including convenience stores, electronics and specialty retailers, heavy duty trucking, and travel centers.
DAS lists more than 12,000 products in its global portfolio, the focus being on benefiting travelers and professional drivers. The company recently entered into an exclusive licensing agreement to provide Cummins-branded products throughout North America. Seeking to better support their business partners, DAS has partnered with nationally known brands like Goodyear.
Most construction companies across the state have a positive outlook on business for 2023.
The Keystone Contractors Association (KCA), in its 2023 construction forecast survey of commercial construction companies, found 81% believe this year will be better than last year, with 22% of those companied predicting drastic growth and 59% looking at modest growth.
According to the survey, 11% of respondents said they are looking for their volume of work to equal last year while eight percent said they expect a drop in business.
“This is positive,” said John O’Brien, executive director of KCA. “People are looking forward.”
O’Brien said in 2022, there was no backlog of work due to supply chain issues and material costs. While supply chain issues and costs are still a concern, he said they are more predictable, giving contractors a more complete picture.
The survey results backed that up with respondents saying they believe projects are back and strong compared to this time last year.
Along with expected growth, 44% of companies said they expect to hire office staff; 68% expect to hire field workers; 36% expect their company to stay the same size as last year; and 8% expect their company to downsize.
One survey respondent said the lack of labor availability will limit the company’s growth potential, forcing it to find more efficient ways to perform.
“Companies are learning to work more with less,” O’Brien said. While filling workforce needs is still a challenge, he said, companies are more prepared. “We promote the industry the best we can.”
In the survey, KCA said one construction executive said 2022 was a strong year due to health care opportunities, a trend which is expected to continue.
This survey is distributed to the entire KCA membership, as well as many other construction companies based throughout Pennsylvania to make sure that all types of companies, market sectors, and locations are represented, KCA said.
Pennsylvania hospitals, while facing financial challenges in the post-pandemic world, still support one in 10 jobs and contribute a fifth of the state’s gross domestic product.
Andy Carter, president and CEO of Hospital and Healthsystem Association of Pennsylvania (HAP) said Tuesday that a report conducted by HAP shows hospitals are facing financial stress due to increased costs of supplies and labor while facing stagnant payments from insurers, Medicare and Medicaid and stock market losses.
“Hospitals are critical to the health and future of Pennsylvania communities, both because of the essential care they provide and their role as job creators and economic engines,” Carter said. “Hospitals support family-sustaining jobs throughout all parts of the commonwealth and are often among—if not the—top employers and economic flagships in their communities.”
HAP’s analysis of fiscal year (FY) 2021 data reveals that Pennsylvania hospitals—both directly and through the ripple effects of their economic activity—benefitted their communities and the commonwealth by:
Contributing $168 billion to the state and local economies
Supporting 590,000 jobs throughout the entire commonwealth
Generating $38 billion in wages, salaries, and benefits
The analysis also highlights the strain hospitals are experiencing due to rising expenses, the continued COVID-19 pandemic, a historic workforce shortage, and a national behavioral health crisis and calls attention to the need for investments and policies to support hospitals long-term sustainability.
“In the face of financial stress there is a risk to access to health care,” Carter said. Since 2020, five hospitals have closed and others are facing cutbacks in services to keep the overall operation solvent, he said.
“No one has lived through a pandemic, economic turmoil from the pandemic, and international turmoil that we are seeing today,” Carter said. “Communities are proud of their hospitals and broadly speaking, most are not at risk of closure.”
That said, Carter emphasized that hospitals want to continue to reflect the quality of services offered before COVID-19 and not become a shadow of their former selves.
However, he said, the increased cost of labor, mainly due to a shortage of nurses and nursing support staff; supply cost increases from gauze to high tech equipment; and pharmaceutical increases, hospitals are feeling the squeeze.
Still they are vital to the communities they are in, he said.
Some of the key findings of the analysis include:
Pennsylvania hospital jobs pay, on average, nearly 6% higher than the statewide average wage for all sectors.
Hospitals rank fifth among all Pennsylvania industries for employment and fourth for total annual wages.
59 of Pennsylvania’s 67 counties have at least one hospital among their top 10 employers and in 18 of them, a hospital is the largest employer.
Hospitals are among the top 10 industries directly contributing to Pennsylvania’s economy, ranked ninth between construction and management of companies and enterprises.
Hospitals and universities with hospital-affiliated medical schools secured nearly $1.8 billion in highly competitive federal research funding to advance health care innovation.
Pennsylvania general acute care hospitals reported $866 million in foregone revenue due to uncompensated care.
According to the Pennsylvania Health Care Cost Containment Council, Carter said, 30% of the state’s hospitals reported losing money in 2021 and 15% reported modest earnings. No one, he said, invested in modernization and new offerings.
“There is no single answer to this,” Carter said, but “we have a range of ideas.”
Changes to Medicare and Medicaid payments are vital. Carter said the government needs to increase those payments, or at least stop the cuts. There was a 2% decrease in July. “Hospitals did get a one-time support from the federal government through American Rescue Plan money,” he said.
HAP has requested money from the state’s pandemic funds as well to offset the losses due to COVID, Carter said.
“We also need to improve the workforce,” he said. “We need to increase the numbers going into the pipeline. While this won’t have an immediate impact, it will help three to five years down the line.”
Carter explained that with the nursing shortage, hospitals are turning to temp agencies to hire nurses from across the country or internationally. That comes with a cost, he said.
A survey of HAP members last winter showed that since 2019:
Hourly rates paid to staffing agencies for registered nurses providing direct patient care in medical/surgical and other units have increased by 108% from $59 per hour to $123 per hour while the average number of shifts per day worked by temporary staff increased from five to eleven
Hourly rates paid to staffing agencies for registered nurses providing direct patient care in specialty units have increased by 82% from $66 per hour to $120 per hour while the average number of shifts per day worked by temporary staff increased from four to nine
Hourly rates paid to staffing agencies for nursing support staff (such as certified nurse assistants, patient care assistants, and nurse assistants) have increased by 444% from $9 per hour to $49 per hour while the average number of shifts per day worked by temporary nursing support staff increased from three to five
“Some of this need is abating as some health care workers are returning to the field,” he said.
Another area of concern is telehealth, Carter said. “We need to cut the red tape and make sure providers are paid for telehealth services.”
Carter explained that due to the pandemic, restrictions were lifted for telehealth. Now they are at risk of expiring. But more than that, he said, providers need to be paid for telehealth services, which is not always the case.
The importance of telehealth, he said, is that it makes care easily assessable and helps with staffing issues.
Finally, Carter said payments from insurers and Medicare and Medicaid payments must increase to match what hospitals pay to treat patients.
“We are calling on lawmakers and insurers to step up and join hands so as not to put hospitals at risk,” Carter said.
Poor working conditions and stagnant wages have led to an increase in strike activity.
Pavlo Buryi, associate professor of economics at Harrisburg University of Science and Technology, said people are facing financial strain and, during the pandemic, faced deteriorating working conditions that required long hours and often long stretches without time off.
“Workers are facing a rising cost of living, but their wages are staying the same,” he said. “Their livelihood is worse off.”
Buryi cited the recent freight railroad workers threat to strike.
“The railroad unions expressed attendance policies as one of the primary reasons for going on strike,” he said. “The same is true for all essential workers,” he added citing the teacher union and advanced care facility worker strikes. “Starbucks employees recently unionized to get better wages too.”
The main complaint is the rising cost of food, gas, services, just about anything people need to buy, while wages are staying the same, Buryi said.
“Everything has gotten more expensive, while the stocks and bonds markets are falling,” Buryi said. “It is reflected in the retirement accounts of workers. Their quality of life has gotten worse, and prospects of potential retirement have been pushed back. These tendencies force people to demand higher wages, which in turn pushes up inflation.”
During COVID, he said, the supply chains and other economic activities were put under additional pressure, which in turn highlighted the poor working conditions of affected workers or even caused the conditions to deteriorate.
However, companies are facing similar increased costs and can’t readily afford to increase compensation, Buryi said.
“Companies have to minimize borrowing because it is expensive to do so now,” Buryi added.
In fact, he said, with the price of borrowing money increasing due to increasing interest rates, some companies will go out of business or be faced with reducing staff.
The Federal Reserve has raised interest rates to discourage spending and cool off inflation.
“However, higher interest rates also put recessionary pressure on the economy. In response to higher interest rates and higher cost of inputs associated with disrupted supply chains, businesses increase prices, lay workers off, keep wages low, and hold off on new capital investments—all to minimize borrowing and save on high-interest rates,” Buryi said.
Because of the higher costs, some businesses cannot make payments on their outstanding bills and are forced to go out of business, he said.
All of this further deepens the recessionary fears that, in turn, drive down stock markets. “At the same time, the inability of the Fed to control inflation suggests further growth in the interest rate, which pushes down the bond markets.”
Buryi said while these economic conditions are alarming, “a well-designed and coordinated public policy would be effective. The government policies around green energy and immigration would play a crucial role.”
He explained that initiatives such as these would create jobs and encourage demand. “Getting inflation under control will be crucial for returning the economy to a healthy state and resolving at least a portion of the underlying issues that caused the labor unions to go on strike,” he said.
Mid-sized companies, industry analysts say, prospered during the COVID-19 pandemic, but now face roadblocks that inhibit continued growth.
Mike Gigler, senior relations manager for Wells Fargo, said mid-sized companies entered 2022 with strong capital, but the impact of labor costs, supply chain issues and transportation woes have curtailed growth.
Wade Becker, partner in RKL’s Audit Services Group and Leader of its Manufacturing and Distribution Industry Group, agreed, saying a number of mid-sized manufacturing and distribution companies are well positioned with capital due to unprecedented demand for products during the pandemic.
“I’ve been impressed by the way they navigated the pandemic,” Gigler said. “They adapted to the new norms.”
Companies entered 2022 in good financial shape, Gigler said, and would continue to see sales growth if it wasn’t for a lack of materials.
“There is a pent-up demand they can’t satisfy,” he said.
In addition to supply chain issues, Gigler said the biggest challenge companies face is the lack of workers and the increased price of hiring those they can get.
“There are a record number of unfilled jobs that impact production,” Becker said. “Many companies are looking at reskilling workers and offering incentives for new employees.”
Some, he said, are giving sign-on bonuses and then training them for the jobs needed.
Companies are also looking at automation to reduce the number of employees needed.
“If machines can do a task, companies can redirect workers to other jobs,” he said.
Becker used retail as an example. Stores have increased the number of self-scanning lanes to make up for unfilled jobs. That is being replicated in the manufacturing environment, he said.
“So many people exited the workforce and while it may calm down, it may not get back to normal as people thought so companies are hedging as they wait to see how it plays out,” he said.
Gigler said many of the machines needed are made overseas, so Wells Fargo has been working with them for the best possible financing.
“You need to understand the value of the dollar vs other currencies, so you don’t get hit with a decline in value when it comes time to pay for the automation,” he said.
Both agree that the availability of raw materials has also been a huge issue facing manufacturers.
“Many companies would be expanding operations now, but can’t get the materials,” Gigler said. In addition, he said, approvals for expansion are seeing delays.
Add inflation to the mix and those materials that are not available now will be more expensive when they are.
“Business owners need to be nimble,” Gigler said. “Money isn’t free anymore.”
The annual inflation rate for the United States is 8.3% for the 12 months ended April 2022 after rising 8.5% previously, according to U.S. Labor Department data published May 11.
Companies, Gigler said, are not pulling back from expansion, but they are being more diligent about their return on investment.
Becker said a new twist in costs for companies is cyber security.
“Companies are needing to invest in IT more now because information is becoming more vulnerable,” he said.
Before the pandemic, criminals were targeting financial institutions, but now “we are seeing them break into manufacturing and distribution facilities and holding their information for ransom.”
All of this adds up to uncertainty for growth through the remaining part of the year and into 2023, they said. Demand for products will continue, but whether companies can meet those demands and expand operations is the question.
“If (companies) could hire and find raw materials they would be doing fantastic,” Becker said.
The current economy with supply chain disruptions and increased costs of materials is a “nightmare” for the construction industry.
David Sload, president and CEO of Associated Builders and Contractors, Keystone Chapter, Inc, said the “nightmare” problem is twofold.
“The first is the ability to get materials and equipment,” he said. “The second is being able to depend on firm pricing.”
Daniel Durden, CEO, Pennsylvania Builders Association, agreed. “In the last 18 months, prices have increased, and products are less available creating longer wait times for projects.”
In fact, he said, some materials have gone up 19% over last year.
Sload said the problem stems from the manufacturing facilities being shut down during the pandemic and the inability to get raw materials from overseas now that manufacturing facilities are up and running.
“This is making it hard for contractors to put bids together,” Sload said. “Manufacturers will only hold a price for a certain window. If the materials aren’t available, they can increase the price,” he said.
Contractors have to build in the projected cost of the materials, which can lead to too high a price for a job, Sload said.
Brett Calabretta, vice president of Warfel Construction, East Petersburg, said his teams have been asking frequent and pointed questions to customers while planning jobs so they can be prepared to choose alternative materials if necessary because the timeline of the job is set before a project starts.
“There are still influencers that we encounter that are out of our control,” he said. “Like the war in Ukraine. Our job is to ask the right questions to develop alternatives to put our clients in the best situation possible.”
Still, according to Sload, those that have bid jobs at the beginning of the year are seeing many of the jobs costing more than they are making, causing them to eat the costs.
“I had a builder tell me the supplier told him the quote for lumber would only be good for as long as it took him to open the email,” Durden said.
He explained that the war in Ukraine and the tariffs in China are creating a shortage of raw materials and fuel.
“We can’t get lumber from Canada, so the price of domestic lumber has gone up day to day. If contractors can’t make money, they won’t build,” he said.
Calabretta agreed that materials are not available when needed. “Electrical components can take up to a year to get,” he said.
The availability of beer at bars, taverns and restaurants in the southeast is becoming a slow flow as supply chain issues hit distributors.
According to the Pennsylvania Licensed Beverage and Tavern Association (PLBTA), distributors have been forced to limit deliveries due to a lack of drivers.
While reports have filtered in from various parts of the state including the southeast and northwest, the Pennsylvania Licensed Beverage and Tavern Association (PLBTA) says the epicenter appears to be in the southcentral section, where with little warning, Ace Beer Distributors (Universal Products, Inc.), Wrightsville, informed bars, taverns and clubs that they were cutting back deliveries to only twice per month.
On their website, Ace describes itself as representing “more than 350 brands (more than 2,000 products distributed!) from over 130 supplier partners and services over 1,400 direct retail partners across Lancaster, York, Adams, Franklin, Fulton, Cumberland, Dauphin, Lebanon, Perry, Mifflin, and Juniata counties.”
According to sources sharing information with the PLBTA, a labor crisis is to blame, specifically a lack of drivers.
In a recent letter to the Pennsylvania House Liquor Control Committee and the Pennsylvania Senate Law & Justice Committee, Chuck Moran, executive director of the PLBTA, told committee chairs that “the decision by Ace is quite problematic for small businesses that rely on the wholesaler.” Moran continued by writing, “Many family-owned taverns and bars do not have enough storage space to handle two or three weeks of malt beverage supplies.”
One club licensee recently wrote to the Pennsylvania Liquor Control Board with concerns about Ace’s delivery decision. The PLCB responded that the club could not pick up their own supplies, and they could not go out of a wholesaler’s territory to attempt to purchase supplies.
The only options offered were to attempt to get a delivery from a smaller distributor (if they would even do so) within the wholesaler’s territory or swap out popular more affordable national brands with local brands from breweries that deliver.
But delivery problems are not new. Before the pandemic, there were similar issues to a lesser degree; however, now those problems are being amplified.
A statewide membership survey conducted by the Pennsylvania Licensed Beverage and Tavern Association in 2019 showed that nearly 40% of PLBTA members surveyed had fewer delivery date options and nearly 20% had experienced delayed delivery of malt beverages from distributors. And more than one out of three members had run out of certain malt beverages and had to wait for a resupply.
Further complicating the issue are outdated liquor laws. By law, bar owners can only receive beer delivered from retail and importing distributors and can’t pick it up themselves, Moran said.
While licensed bars, taverns and clubs can purchase liquors at a state store and personally deliver the supply to their bar or tavern, current law does not allow them to pick up and personally deliver malt beverages to their own establishment.
“In late 2019, we suggested a reasonable business solution to this problem, proposing legislation that would allow R, H, E, and club licensees to pick up a limited ‘emergency’ supply of beverages from the wholesaler or distributor and then deliver that supply to their own establishment when the wholesaler was unable to make a timely delivery,” Moran wrote in his letter to the legislative committees that oversee industry-related matters.
For now, Moran says his association hopes the legislature as well as distributors will listen to these concerns and help build business solutions.
The continuing rising price of diesel fuel is having a major impact on the economy and the supply chain as independent truckers are finding it more expensive to haul freight than they are making on the load.
Pennsylvania has the ninth highest prices in the nation due to taxes, creating a greater impact locally on the availability of goods, according to Rebecca Oyler, president and CEO of the Pennsylvania Motor Truck Association.
“It’s a matter of math,” she said. “If you can’t make money, you’re not going to haul freight. Small companies are suffering the most.”
The price of diesel in Pennsylvania as of May 25 is $6.302 per gallon, a historic high, according to AAA. A year ago, diesel was selling for $3.46 per gallon.
“We are already seeing and continue to see the impact of the rising cost of crude oil on consumer goods as measured by the Consumer Price Index (CPI),” said Dr. John Kooti, dean of the John L. Grove College of Business, Shippensburg University. “Although large companies may be able to absorb the cost and eventually pass it to consumers, independent truckers may not have the ability to do so, thus, might well lead to bankruptcy among some independent truckers.”
Oyler said most companies can get fuel surcharges based on the past week’s prices, which they can add to their standard rates, but they are not getting the full rate because prices are rising almost daily.
“Large companies can absorb the increased costs,” she said. “Most companies don’t get the reimbursement for 30 days or more so smaller companies can’t manage the increase.”
“Generally speaking, the volatility of fuel prices increases uncertainty and decreases the ability for businesses to plan operations,” said Dr. Ian Langella, professor of Supply Chain Management and chair of Finance and Supply Chain Management Department at the John L. Grove College of Business, Shippensburg University.
In some cases, fuel surcharges are included in contracts and can result in basically a sharing of the risk between shipper and carrier, he said.
“Independent truckers do not have the same bargaining power as large companies, so it depends on the financial strength of independent truckers” whether they stay in business, Kooti said.
“I don’t see a short-term solution,” said Oyler. “This comes down to supply and demand.”
Olyer said the war in Ukraine is reducing supply of crude oil, but demand is still up because consumers are still spending. “It’s a hard issue to fix and it won’t be quick,” she said.
While consumers are still spending, Kooti said consumers are already being affected by the rising cost of goods and services. “Last month our inflation rate was up 8.3% compared to last year, the highest in decades” he said.
Langella added, “Consumers are also adversely impacted by the supply chain disruptions and shortages. While most of our demand for goods and services has been fulfilled as it was in the past, there are more examples of product shortages that were almost unheard of before the pandemic.”
Trucking companies are not the only ones being affected. Industries like lawn care services and contractors are feeling the pinch as well. “If there are no surcharges in their contracts, they are really going to suffer,” Oyler said.
“Most lawn services have annual contracts with fixed rates, so it is difficult to pass the rising fuel to consumers in the short term,” Kooti said. “Any future contract will reflect the forecasted cost of fuel, thus eventually will be passed to consumers. It all depends on how long the rising oil prices continue.”
There may be some ways to renegotiate based on the contract. Langella said. “After all, small businesses will find it incredibly difficult to absorb this and may seek to share the risk with customers through a post contractual negotiation.”
Oyler said the country needs to increase the supply of domestic energy as a long-term solution. “We need to think strategically about how to make that happen.”
The bottom line, she said, is the general public will pay the increased costs. “When you think about it, the supply chain is greatly affected because everything we use is transported and those vehicles use diesel,” she said.
Even when trucks are parked or companies streamline loads or haul less, there is an increased cost to transport goods, she said. “In the end, it comes back to the consumer.”
Oyler said she doesn’t see an end in sight, noting as summer approaches, demand for fuel goes up. “Hurricane season will affect the availability as well,” she said.
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